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FLIGHT Centre Travel Group (ASX: FLT) has outlined plans for an aggressive expansion into Asia, as its strategy for a new global business to provide in-destination services to travellers takes off.
The Brisbane-based company has increased its stake in a joint venture deal with Vietnam's Thien Minh Group (TMG) which will create a larger Asia-based destination management company (DMC).
Flight Centre and TMG's Buffalo Tours business currently operate in 10 other Asian countries and the plan is to acquire or launch similar businesses in other key regions to create a worldwide DMC.
Under the revised joint venture, they'll be able to provide services such as transfers, excursions and day trips, land arrangements for cruises and organise tour groups.
The move is in line with the company's strategy to own and control the vertical chain rather than simply be a travel agent.
Flight Centre managing director Graham Turner said the new agreement has resulted in his company taking a 58.5 per cent holding in the expanded Asian business, up from 49 per cent.
"We believe there are huge opportunities in the in-destination sector and it has become one of our key strategic growth areas for the future," Turner says.
"This agreement will fast track our growth in this sector and establish the foundations for a global DMC that will deliver essential and valued services to travellers when they arrive at their destinations," he says.
The joint venture currently operates in 10 countries including Indonesia, Singapore, Malaysia, Thailand, Cambodia, Laos, Hong Kong, China, Japan, Myanmar and Vietnam.
Turner says the ramped-up operation will give Flight Centre greater control over product offerings and access to other new revenue streams.
He says further acquisitions and diversification are planned and the company is also still considering hotel management opportunities in the future.
The new deal is expected to generate revenue of US$70 million, with US$5 million in earnings before interest and tax in the 2017 calendar year.
The share market has responded well to the news, as Flight Centre trades up 0.2 per cent at $28.94 as of 1:44pm AEST.
Business News Australia
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